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OST-99-5046

Challenge Air Cargo, Inc.

OST-99-5046	January 26, 1999	Application for an Exemption	US-Peru-Beyond; Dallas-Venezuela/Brazil-Beyond All-Cargo
		Service List

By this application, Challenge requests authority to enable it to serve Peru, Venezuela and Brazil from additional gateways in the United States. In the case of Peru. Challenge asks that its authority be expanded to encompass the new route description set forth in the newly executed "Open Skies" agreement between the U.S. and Peru. In the case of Venezuela and Brazil. Challenge requests that its authority be expanded to permit Challenge to operate (via any authorized intermediate points and to any authorized beyond points) from Dallas/Ft. Worth. This application is prompted by a recent decision by Challenge to establish Dallas/Ft. Worth as a second hub for Challenge's services to Latin America. For many years. Challenge has served Latin America via its hub in Miami. However, as trade and commerce between the United States and Latin America has continued to develop and evolve. it has become clear that there is a burgeoning demand for scheduled all-cargo service to/from Latin America at other gateways in the United States. In recognition of this fact, Challenge is establishing a pattern of service linking Dallas/Ft. Worth with various Latin America destinations.

Counsel:  Zuckert Scoutt, William Callaway, 202-298-8660

Challenge Air Cargo, Inc.

OST-99-5046

February 10, 1999

Answer of the Dallas/Fort Worth Intl Airport

DFW-Peru/Venezuela/Brazil Authority

Dallas/Fort Worth welcomes Challenge's application and its decision to begin DFW hub operations to Latin America later in 1999. DFW considers itself an excellent MidAmerica gateway for air cargo services to Latin America, due to its strategic geographic location and the matrix of air cargo flights and truck routes that hub at DFW Airport. Commencement of Challenge's new DFW cargo services will make for more convenient routings for air cargo to Latin America from Texas and points west, and provide a needed alternative to the congested Miami gateway.. As Challenge points out, initially Challenge's routings from DFW to Peru, Venezuela and Brazil will be via authorized intermediate points. However Dallas/Fort Worth fully expects Challenge to be able to support DFW nonstop service to one or more of these countries in the near future. Therefore, Challenge should be awarded the authority requested to be able to offer nonstop service between DFW and Peru, Venezuela and Brazil.

Counsel:  Bagileo Silverberg, Michael Goldman, 202.944.3305

Challenge Air Cargo, Inc.

Scheduled foreign air transportation of property and mail between (1) any point or points in the United States via any authorized intermediate point to a point or points in Peru and beyond to any authorized beyond point,  (2) between Dallas/Ft. Worth via any authorized intermediate point to any authorized point in Venezuela and beyond to any authorized beyond point, and (3) between Dallas/Ft. Worth via any authorized intermediate point to any authorized point in Brazil, and beyond to any authorized beyond pointy Challenge also seeks to integrate these authorities with its existing certificate and exemption authority. Challenge requested that the authority for each country be granted, as applicable, coextensive with the duration of its existing certificate authority to serve Peru and Brazil and its existing exemption authority to serve Venezuela.

By:  Paul Gretch

United Parcel Service Co. and Challenge Air Cargo, Inc.

We tentatively find that the route transfer meets our standards for approval. Specifically, the introduction of UPS' service will provide new service options to the shipping public, more fully use our bilateral route opportunities and enhance competition in the U.S.-Latin America all-cargo market. In these circumstances, we tentatively conclude that approval of the transfer will benefit the public and will not conflict with our international aviation objectives.

We also tentatively find that both carriers will remain fit to provide their authorized services and that the transfer of Challenge's Latin America route authority to UPS will have a positive impact on the viability-of both carriers- Challenge will benefit from the, infusion of new capital to support its future plans. UPS will benefit from the ability to expand its operations to new markets, improving its competitive posture. The improvement in each carrier's viability will enable each carrier to compete more effectively and thereby enhances competition in the airline industry. 

Furthermore, we tentatively find that there will be a positive impact on the U.S. trade position in the international air transportation market as a result of this transfer. Since UPS has a much more extensive route network and worldwide infrastructure than Challenge, UPS will able to provide more effective competition to both foreign carriers and other U.S. carriers in the U.S.-Latin America market. In these circumstances, air commerce between the United States and Latin America should increase, improving the U.S. trade position.

By:  Bradley Mims

United Parcel Service Co. and Challenge Air Cargo, Inc.

We have decided to make final our tentative decision in Order 2000-3-2 to approve the transfer of Challenge's Latin America authority to UPS and also to grant Challenge an interim exemption to permit it to continue operating its existing services until UPS is prepared to begin its own operations in the transferred markets.  The record in this proceeding shows that UPS is hiring 90% of the Challenge employees. Moreover, as we noted in our show-cause order, the expansion of UPS' services into Latin America will create jobs, having an overall positive impact on airline workers. Furthermore, it is clear from the record of this proceeding that collective bargaining provisions are in Place to address employment issues and, as noted by the IBT, additional supplemental agreements also have been presented to the pilots relevant to these issues. In this regard, the IBT has stated that supplemental agreements provide an additional two million dollars in separation benefits.

By: Bradley Mims

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